Just going throught everything that is in chapter 2 breifly.

  • Created by: Shehneel
  • Created on: 28-01-12 11:55

2.1 Why People Chose To Work

Why do people work?

1.) PAY - they want money so that they can purchase goods.

2.) JOB SATISFACTION - people may want to work even thought they do not need the money, this may be because:

  • of social reasons
  • OR enjoyment of the job.
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2.1 Why Don't People Work?

People may chose not to work because of the specific stage they are at in their personal life cycle...

  • IN EDUCATION - people may chose to study before they start working.
  • BRINGING UP CHILDREN - people (women, and increasingly men) may chose not to work so they can stay at home and raise thir children.

NOTE: People who are not working should not always be called unemployed, because they may chose not to work. People who chose not to work are called economically inactive.

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2.1 Specialisation

Specialisation - where each worker concentrates on only one small aspect of the entire production process.


  • Workers become more skilled at the aspect they are doing.
  • Output can be produced more quickly because workers become familiar with  the reduced number of tasks they have to complete.
  • Output can be sold at a lower cost.
  • Workers can concentrate on the skill they are best at.


  • Workers become interdependant, so if one part in production fails, there are major problems.
  • Jobs become boring for the workers.
  • Workers become less motivated and labour turnover may rise.
  • If a worker is absent, there are issues with who will cover.
  • Worers become less flexible, it is harder to adapt.
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2.1 How ICT Has Affected How We Work


Online retailing has grown, reducing the need for people to be employed in shops and other buisness outlets.

New jobs in web-based buisnesses.


E-mail has sped up communication, there is less need for telephone calls or letters.


People now have internet and e-mail, so they can work from home.

There is now more flexible working, so people can manage both work and looking after a young family.

This reduces costs for the company, because they do not need things like office space.

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FULL-TIME - a worker that works the maximum number of hours in the working week for a particular job.

MOTIVATION - the reason that someone does something.

PART-TIME - a worker who only works a fraction of the working week of a full-time employee.

TEMPORARY EMPLOYMENT - work that will only last for a specific period of time.

SEASONAL EMPLOYMENT - work that is only required at a specific time of the year.

SPECIALISATION - where each worker concentrates on one small aspect of the entire production process.

ICT - the use of electronic and computer technology.

FLEXIBLE WORKING - workers that are more adaptive in time, location or manner of work completed.

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2.2 How People Are Paid

SALARY - pay started as a yearly total, but is paid monthly.

WAGE - pay calculated on an hourly rate, multiplied by the hours worked.

COMMISION - payment made to workers for achieving a certain target.

OVERTIME PAYMENT - higher rate of pay for work in excess of normal working hours.

SHIFT WORK - work patterns that do not follow standard working hours.

BANKERS' AUTOMATED CLEARING SERVICE (BACS) - automatic transfer of funds between bank accounts, this may take up to three days.

FRINGE BENEFITS - workers are paid in ways other than money, e.g. a company car. Fringe benefits are usually used in high skill, high pay jobs.

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2.2 Deductions On A Pay Slip

(GROSS PAY - total amount of pay for the worker, without reductions.)

(NET PAY - total amount of pay for the worker with reductions, like tax, national insurance and personal contributions.)

INCOME TAX - all income is taxed, a percentage is given to the government. As income rises, the percentage of income tax paid will rise.

Income tax works in two main ways:

  • Pay as you earn (PAYE), tax will be deducted from the employer before worker's income is given to the worker.
  • Self-assesment (SA), for workers who are self employed, tax is paid by the worker.

NATIONAL INSURANCE CONTRUBUTIONS - a tax paid by workers which entitles the payee to qualify for benifits when and if necessary.

PENSTION CONTRUBUTIONS - a deduction from a workers' pay that is ment to contribute to a future retirement pension.

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2.2 Deductions On A Pay Slip (2)


  • Trade union subscriptions
  • Staff association membership fees
  • Student loan repayments

In addition, if you are an employee, your employer must give you certain documents...

P45 - a document provided by an employer when a worker leaves the organisation.

P60 - a document provided by an employer on a yearly basis showing total pay and deductions for the year.

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EXPENSES - payments given to workers to compensate for any expenditure necessary to complete their work.


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2.3 Factors That Affect the Supply of Labour

GENDER - there is a slightly higher proportion of men in the labour force than women, this is due to:

  • Changing cultural attitudes - it is now acceptable for women to work
  • A decline in primary and secondary sector industries, more likely to recruit men than women.
  • Changes in legislation making it easier for women to work while raising a family.
  • Changes in the tax and benefit system, rewarding those with children to return to the workforce.


TAXATION - if workers keep more of their pay (tax reduces) people have more disposable pay, so more people get employed.

STATE BENEFITS - the lower the benefits are, the more people are willing to work because they cannot afford to remain out of work.

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2.3 Factors That Affect Demand

DERIVED DEMAND - the demand for labour (workers) to produce goods and services.

GOVERNMENT - the UK government indirectly affects demand for labour...

  • Right to a paid holiday
  • Maternity/paternity pay 


  • If the wage is higher, more people would want to supply their labour.
  • If the wage is lower, then the business would want to recruit more people than were willing to supply their labour.
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2.3 Reasons For Differences in Wages

TRAINING AND SKILLS - there are little people with high skills and training, so the wages need to be higher to attract workers.

GENDER- women are likely to be paid less than men, this is partly due to women taking career brakes to raise children, so they miss out on training and promotion opportunities.

AGE- older workers are more likely to be paid more than younger workers because they have more experience and skill for a higher paid job.

TRADE UNIONS - organisations that workers can decide to join, they protect workers and negotiate for higher wages for their members. They can threaten industrial action, strikes.

GOVERNMENT INFLUENCE - minimum wage, lowest legal hourly rate that can be paid.

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2.3 Why Do Wage Rates Change?


More people want to work in a particular job, this will be likely to lead to a reduce in wages, because the business can afford to pay less as, there are more workers available.


If there is a shortage of labour in a particular industry, businesses need to offer higher wages, to get more people to supply their labour for the industry.

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2.4 Costs of Unemployment


No income except for benifits.


Loss of skills

Health (mental)

Family breakdown

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2.4 Why does the duration of unemployment vary?

Skills and training, the higher the skills and tranining, the liklier the person is going to get a job.

Qualifications, the less qualifications, the less attractive the person is to a buisness.

Age, older poeple find it harder to find a job because they expect higher wages, they are also considered too old to train for new positions. (Age discrimination is illegal)

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2.4 Government Strategies to Help the Unemployed

TAX ALLOWANCES - people have to earn up to a certain level before they start paying tax.

JOBSEEKERS' ALLOWANCE - benefit for poeple looking for work.

WORKING TAX CREDITS - benifits for childcare.

NEW DEAL - provides training for unemployed people.


APPRENTICESHIPS - helps poeple gain skills and helps the buisness.

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